Contract Signed (for the 10th time)

Last Update: 05/03/2004 14:38

Israel, India ink billion dollar Phalcon deal

By Amnon Barzilai, Haaretz Correspondent

Israel Aircraft Industries is to provide the Indian Air Force with three advanced Phalcon early-warning spy planes, for a total purchase price of $1.1 billion – the largest ever for Israel’s thriving security export industry.

The final agreement was signed Friday afternoon in New Delhi by IAI CEO Moshe Keret and the head of the Indian Defense Ministry’s procurement division, M. C. Mahopatra. Details of the deal were finalized during a visit by Sharon to India several months ago.
The payment for the planes is to be spread over a number of years. According to IAI insiders, India will pay around 25 percent of the sum, some $300 million, as a down payment, and the IAI will officially enter the order in its books.
The director general of the Defense Ministry, Amos Yaron, said Friday that the signing of the Phalcon deal represents a significant breakthrough for the defense industry.
“The Phalcon deal will contribute to the Israeli economy,” he said, “and improve the reputation of the Israeli defense industry in the global market.”
Under stiff U.S. pressure, Israel canceled a similar sale to China in 2000. At the time, the United States argued that such aircraft would increase the threat to Taiwan and endanger U.S. pilots in case of war with China. The Phalcon is a competitor to the U.S. Airborne Warning and Control System AWACS aircraft.
The Times of India reported in January that the White House had made clear to Indian officials that it supported the sale by Israel to India of the Phalcon and Arrow anti-missile systems.
“Seemingly overriding objections from the State Department, White House officials told their Indian counterparts that Washington did not oppose the transaction,” the paper wrote.
The Phalcon mates avionics from state-owned Israel Aircraft Industries with Russian Ilyushin airliners. An IAI spokesman said the move by the security cabinet, which consists of Sharon and several senior ministers, paved the way for the final deal to be signed within several weeks.
Last year, U.S. officials pressed Israel to postpone the Phalcon sale, citing increased tensions between India and Pakistan, two nuclear powers, but later withdrew its objections.
There is no U.S.-made equipment in the system, which consists of a long-range radar mounted on the Russian-made planes. However, Israel coordinates its sales with Washington, its main ally.
An agreement in principle for the deal was signed in October. Last month Israeli, Russian and Indian officials completed the required diplomatic protocol for it to go through.
Israel and India have grown closer in recent years, and Israel has become an important arms supplier to India. India wants to strengthen its defenses by acquiring the airborne warning and control systems, which can detect aerial threats and serve as a platform to direct combat planes to targets.
Neighboring Pakistan, however, has criticized what it called India’s weapons shopping spree as dangerous for the subcontinent, where the two major powers have fought three wars since gaining their independence from Britain in 1947.